Frederic Bourke, the American entrepreneur who led a charmed life and whose prosecution brought new prominence to the Foreign Corrupt Practices Act, has been sentenced to a year and a day in prison and fined $1 million for investing in a bribe-tainted deal in Azerbaijan and then lying to FBI agents about it.

The co-founder of luxury handbag-maker Dooney & Bourke was convicted in July in a Manhattan federal court of conspiracy to violate the FCPA and making false statements in a federal investigation. He was acquitted of money-laundering charges. Bourke could have been jailed for up to ten years following his conviction.

The government indicted Bourke, 63, in 2005, along with Czech-born fugitive Viktor Kozeny, for bribing government officials in Azerbaijan in a failed attempt to take over the state oil company known as Socar. Kozeny, 46, has been a fugitive for about a decade. From the Bahamas, he's been fighting extradition to the United States. He's also accused in New York of stealing $180 million from his investors, including Bourke, and he's wanted by the Czech Republic for allegedly looting a national pension fund.

Bourke claimed he was a victim of Kozeny's fraud and didn't know about his scheme to bribe Azeri officials.

As reported by Bloomberg's David Glovin -- whose in-depth coverage of Bourke's prosecution and trial brought new international attention to the FCPA -- witnesses described "plane flights into Azerbaijan with millions of dollars stuffed into suitcases, of shakedowns in government offices, and of lavish spending by a flamboyant Kozeny who saw himself as a new oligarch. Kozeny told his investors they might control half of Azerbaijan’s economy if they captured Socar."

Bourke's prosecutor, assistant U.S. attorney Harry Chernoff, said, “This prosecution has served notice to potential violators of the FCPA, including passive investors, as Bourke inaccurately styles himself. They will not evade prosecution just because they have left most of the dirty work to foreigners.”

Before getting to William Jefferson, this reminder: Frederic Bourke is scheduled to be sentenced in Manhattan today (Tuesday, November 10) at 2:30 pm. He could be jailed for up to ten years for conspiracy to violate the Foreign Corrupt Practices Act and lying to federal investigators.

Now Jefferson: He'll learn his sentence this Friday in Alexandria, Virginia. Prosecutors want him jailed for 27 to 33 years. And once again there's a question whether the jury found Jefferson guilty of any FCPA-related offense. This time the answer could influence how long he'll spend behind bars. Here's the issue.

The former nine-term congressman was convicted in August on 11 of 16 corruption charges. He was acquitted on Count 11 of the indictment -- the only substantive FCPA charge he faced. But the jury convicted him on Count 1. It alleged three separate illegal conspiracies -- to solicit bribes, deprive citizens of honest services, and violate the FCPA. The jury's verdict form did not require it to specify which of the three illegal conspiracies the panel believed he engaged in. So Jefferson's conviction on Count 1 may or may not have included a finding that he conspired to violate the FCPA.

Since the verdict, many have wondered whether Jefferson was really convicted of an FCPA-related offense. Could he have been acquitted of the substantive charge and convicted on the conspiracy? Our view (here) was yes, the jury could have convicted Jefferson of conspiracy to violate the FCPA. The evidence supported it. And a guilty verdict recorded for Count 1 meant all three alleged conspiracies could be presumed proven, including the FCPA-related charge.

The government has now said the same thing in its sentencing memo: "The verdict form completed by the jury on August 5, 2009 did not require the jury to delineate which, if not all, of the objects charged in the conspiracy in Count 1 were found to have been proved, only that at least one of the objects was proven by the government beyond a reasonable doubt." Jefferson's lawyers argue that based on the facts, the jury couldn't have convicted him of the FCPA conspiracy once it acquitted him of the substantive FCPA offense.

Will Judge Ellis use the FCPA-related conspiracy element to calculate Jefferson's sentence? We hope not. Trying to read the jury's mind when imposing a sentence on any defendant is wrong. In Jefferson's case, not requiring the jury to declare which of the three conspiracy objects it voted to convict on was an error. Fundamental to a defendant's rights at trial and for appeal is jury accountability. That accountability was lacking as to Count 1. So the count should be tossed as to all three conspiracies it alleged, and none of them should be included in the sentencing computation.

William Jefferson is scheduled to be sentenced on November 13, 2009 at 9:00 am in the U.S. District Court for the Easter District of Virginia (Alexandria Division) by Judge T.S. Ellis, III.

Download a copy of the government's sentencing memorandum in U.S. v. Jefferson dated November 6, 2009 here.

Download a copy of William Jefferson's memorandum in aid of sentencing dated November 9, 2009 here.

* * *The D & O Diary reports the resolution of an FCPA-related civil suit on November 6, 2009 against Nature’s Sunshine Products. The company agreed to pay $6 million. The plaintiffs in the securities lawsuit had alleged the company lacked appropriate internal controls and that its books and records did not reflect the foreign transactions.

In late July, the SEC filed a settled enforcement action against Nature's Sunshine Products Inc. (NSP), its CEO Douglas Faggioli and its former CFO Craig D. Huff. The charges involved bribes by NSP's Brazilian subsidiary to customs officials and false accounting to conceal the payments. The SEC's complaint alleged that Faggioli and Huff, in their capacities as control persons, violated the books and records and internal controls provisions of the securities laws in connection with the Brazilian bribes. See our post here..

Last week, the U.S. ambassador to Kenya, Michael Ranneberger (left), made a very strange announcement. He confirmed on his Twitter page that the U.S. government had denied a visa to Kenya's attorney general Amos Wako. What's strange is that as far as we know, it's the first time an American official has ever revealed a visa determination under Presidential Proclamation 7750. That's the executive order giving the State Department the power to exclude foreign kleptocrats, their families and friends. Before now, those decisions had always been made -- and kept -- in complete secrecy.

In October, U.S. Assistant Secretary of State Johnnie Carson said the U.S. had denied a visa to an unnamed senior Kenyan official who had been "obstructive in the fight against corruption." After Carson's announcement, the Kenyan press had been speculating who the unnamed senior official could be. But it was Ambassador Ranneberger who confirmed it. He didn't mention the attorney general by name but sent Twitter readers to a story in the Kenyan press that did.

We talked with a couple of State Department officials earlier this year about Proclamation 7750 (see our post here). Why, we asked, were those banned from American soil never publicly identified? "The State Department," they told us, "can't publicly release the names of those denied entry under Proclamation 7750 -- U.S. law generally prohibits disclosure of visa-related information." And consistent with that, we've never seen confirmation from the State Department or any American government source of a Proclamation 7750 visa action. Until Ambassador Ranneberger's tweet.

Attorney General Wako, meanwhile, sprang to his own defense and threatened to sue someone in the United States for defamation (a good reason to keep Proclamation 7750 determinations secret).

Kenya's Standardsaid Wako, who has served as attorney general since 1991, "confirmed he received a letter from the U.S. banning him from the country." The paper's account also referred directly to Proclamation 7750, which the foreign press rarely mentions and the U.S. press completely ignores. The Standard said:

In a seven-page statement that took a half an hour to read, Wako prosecuted his case, defending his record as a "reformist" and attacking the revocation of his visa as serving American interests. . . . "Let me state that Sitswila Amos Wako has not been engaged in corrupt actions which have adversely affected the national interests of the United States of America or at all," he said, in reference to Proclamation 7750 of January 12, 2004, which a U.S. official in Nairobi confirmed had been used to lock him out their country.

Wako claimed he's "totally indifferent to the revocation of the visa" since "I have no desire to visit the U.S." But, he said, the grounds given for the visa determination are defamatory and he "intends to seek legal advice with a view of instituting legal proceedings in the U.S."

We naturally have a few questions: When does United States law allow disclosure of the State Department's visa determinations under Proclamation 7750? On what grounds was it allowed in Attorney General Wako's case? Will there be more announcements of actions taken under Proclamation 7750?

In China's western municipality of Chongqing, a special deployment of 25,000 police officers was called in to fight organized crime. Chongqing city proper has around five million people but the region-- called the "municipality" -- has closer to 32 million (California's population is about 36 million). Last month, police said they had so far detained 4,893 suspected gangsters and formally arrested about 1,500. Among the 30 or so municipal officials being held are a former deputy police commissioner and the head of the justice bureau, Wen Qiang.

The China Daily (which usually reflects the government's views) referred to Wen as Chongqing's criminal godfather. The paper said he amassed at least $15 million through bribes for providing "a protective umbrella" that shielded gangsters from the authorities. Reports say at least a fifth of the local police officers have been fired and the rest have been reassigned to break up Wen's web of patronage.

Like Batman's worst nightmare, Chongqing's police corruption unleashed a reign of terror. The U.K. Telegraph quoted a local resident as saying: "People who do not live here cannot imagine what goes on. The gangs were shooting people down in the city center in broad daylight or hacking them to death. Their victims could never report the cases to the police for fear of revenge."

Of the first group of gangsters to go on trial, six have been sentenced to death and 25 others were given sentences ranging from one to 18 years in prison.

* * *Congratulations to all New York Yankees fans. A great team proved its worth after a drought, if you can call it that, of nine years. The real drought, of course, was the 86 years when the Boston Red Sox didn't win a world series. Their dry spell stretched from 1918 to 2004. During that time, the Yankees won the series 26 times. We grew up in New England during some of the years between 1918 and 2004. While the Yankees' fans were having all the fun, Boston's were given the chance to learn faithfulness, patience, and humility -- good things to know. But we're ready for a bit more fun. Maybe next year.

* * *Our thanks to the correspondent who let us know this week that Bribery Abroad will be the basis for a seminar next semester at their law school. That news gives us a slim but adequate excuse to post the link to our favorite YouTube video here..

Elizabeth Spahn (left), a professor at the New England School of Law, stopped by this week. She left a comment about Andy Spalding's latest post. In it, she cited her recent article that asks: Why is there so little legal scholarship regarding international bribery? Why aren't law professors training their students on the issue? Why, she asks, don’t legal educators want to talk about international anti-corruption initiatives?

The answer, she says, is tied up with false notions in the West about legal imperialism. Law professors (she's been one since 1978) shy away from teaching about bribery abroad "because of a well intentioned discomfort with the idea of imposing Western moral values on cultures and systems vastly different from our own." In 72 pages of clear and exciting prose, she explores -- and debunks -- the idea that the Foreign Corrupt Practices Act and other anti-bribery initiatives are bad for anyone except those who are caught and punished.

Prof Spahn was a Fulbright professor at Peking University Law School and the Beijing Foreign Studies University during 1999–2000, lecturing on American constitutional law and employment law. In 2005, she returned to China as a Fulbright senior specialist in Chongqing. The corruption she saw in Asia left her in no doubt about what's wrong and what has to be done:

A global “culture of corruption” has indeed arisen. . . . It directly affects the safety of ordinary consumers throughout the world who depend on imports from a wide spectrum of MNCs doing business in countries with high levels of corruption and weak legal regimes. It directly undermines environmental reform technology and clean up efforts globally. It frustrates efforts to achieve very basic human rights. Bribery skews purchasing decisions making a mockery of any hope of a rational market. If the economists are to be believed, bribery significantly exacerbates the growing global gap between the unimaginably rich and the desperately poor.

Prof Spahn has the courage to put her heart into her scholarship. Having real people in mind elevates her words and her message. Listen to this:

My own attention was directed to anti-corruption reform at the very beginning of my field work in Asia. Before entering China to teach law, I decided that I should learn more about rice in order to better understand the root of Asian culture. I spent six weeks in Bali, Indonesia (an idyllic setting). One week I spent in a village without running water or electricity, vainly attempting to learn how to plant rice. At the inevitable banquet, on the night before I, as a Western “imperialist human rights feminist rule of law” advocate, was nervously to enter Communist China, I chatted with the patriarch of the Balinese family, a gracious elderly farmer who was blind due to cataracts he knew could be cured by Western surgery if only the money were available.

“What one thing would help his family most?” I asked. I anticipated several potential answers: running water, better medical access, perhaps electricity run into the village (I had already provided the all-important new soccer ball for the village kids as my thank you gift). His answer was that if only the corruption could be eliminated or even just reduced, his family, his village, could manage the rest on their own. This was the beginning of my true education about Asia.

Eighteen months later, at the end of my long stay in China, I was no longer nervous. (The saying is that you visit China for two weeks, you write an article; you visit for six months and write a book. After a year you can no longer speak at all. After a year and a half immersion, my connection to Chinese culture was firm, and I was pretty much speechless.)

Walking around elite Peking University’s beautiful Nameless Lake for the last time with one of my very favorite Chinese students of all time, who is perhaps the last of the genuine true believers in Marxism and the Party, I asked what topic I could work on that might really help Chinese people. “Corruption,” he said.

The simple Balinese rice farmer and the elite Peking University Party Member agreed. And so this human rights /rule of law advocate turned her attention to corruption. Seven years of hard study later, I must say they were both correct. I am grateful to both of them for my education and happy to have my speech back.

With so much to lose by going to trial, how many organizations and people will plead guilty to white collar crimes they didn't commit? Ellen Podgor (left) of Stetson University College of Law and the White Collar Crime Prof Blog asks that question in her latest essay, "White Collar Innocence: Irrelevant in the High Stakes Risk Game." She looks at three defendants who claimed their innocence at trial but were convicted -- Arthur Andersen LLP, Jamie Olis, and Jeffrey Skilling. And three who pleaded guilty and avoided trials -- KPMG, Gene Foster, and Andrew Fastow. The first group, as everyone knows, got clobbered. The second group, Prof Podgor says with considerable understatement, enjoyed reduced sentences and finite results.

"The pronounced gap between those risking trial and those securing pleas is what raises concerns here," she says. "Some refer to this as a 'trial penalty' while others value the cooperation and support the vastly reduced sentences."

In Olis's case, for example, she points out that the 'trial penalty' paid by the former Dynegy tax executive convicted of accounting fraud resulted in "an initial sentence that was 288 times greater than a non-risk taker and an eventual sentence that was approximately seventy-two times greater than a co-worker who decided not to take the risk of going to trial. [Olis's] boss, who also did not risk trial, received a sentence less than one quarter of what Olis received."

No wonder guilt or innocence doesn't always figure in decisions to fight white collar charges in court. For individuals, the trial penalty can mean sitting in jail for decades (or as long as they survive); for organizations it can mean a corporate death sentence. Plea bargaining, though, removes the risks and limits the damage.

When the amount and quality of law enforcement are just right, when the guilty are usually punished and the innocent usually go free, we call it the "rule of law." Most of us don't think much about the rule of law. We enjoy its benefits and take it for granted, forgetting that it's a rare blessing -- and very fragile. So when the rule of law is out of balance and someone points that out, we should be grateful. Ellen Podgor is someone we're grateful for.

Her essay, "White Collar Innocence: Irrelevant in the High Stakes Risk Game," can be found on SSRN here. It'll be published soon in the Chicago-Kent Law Review..

On the subject of Frederic Bourke -- the wealthy entrepreneur convicted in July of conspiring to violate the Foreign Corrupt Practices Act and lying to FBI agents -- we now know what issues his lawyers plan to raise on appeal. Most relate to what Bourke knew and intended -- his mens rea. In a recent pleading arguing for his release pending the appeal, his lawyers said:

[T]he issues Bourke intends to raise on appeal relate closely to each other and, in turn, to the critical disputed aspects of the case. A series of issues—the conscious avoidance instruction, the good faith instruction, the absence of an instruction on "willfully and corruptly," and the exclusion of the Dresner testimony, for example—bear directly on Bourke's mens rea, which was the central battleground at trial. The assessment of Bourke's mens rea, in turn, depends heavily on the weight given the testimony of Bodmer and Farrell. . . .

The mens rea argument didn't work for Bourke in his motion for acquittal or a new trial (see here). Nor did it work for David Kay and Douglas Murphy in the Fifth Circuit or with the Supreme Court. See our posts here and here.

But it might work for Bourke on appeal. He's got deep pockets and good facts. And the timing is right. There are more questions these days about the criminalization of business mistakes and mere negligence. Under the influence of thoughtful commentators such as Ellen Podgor at the White Collar Crime Prof Blog and Tom Kirkendall at Houston's Clear Thinkers, more appellate justices must be wondering if the vague elements that are part of so many white-collar prosecutions are fair -- including the ever-more elusive mens rea element. Last month, the Supreme Court agreed to review whether the honest-services statute used to prosecute Jeffrey Skilling and Conrad Black (18 U.S.C. § 1346) is too vague to meet constitutional standards. If that's a signal of wider judicial discomfort with some of the push-the-envelope white-collar prosecutions, mens rea could be in play, and that could help Bourke.

His prosecution didn't include a substantive FCPA charge. Bourke was tried and convicted for conspiracy to violate the FCPA. On appeal, some of his arguments will probably relate exclusively to the conspiracy elements -- such as whether there needs to be an overt act. So he could still win on appeal without us learning anything new about the FCPA itself.

Bourke is scheduled to be sentenced on November 10, 2009. He faces up to ten years in prison.

View a copy of the October 16, 2009 Reply Memorandum in Support of Defendant Frederic Bourke, Jr.'s Motion For Release Pending Appeal here.

The first time we heard from Andy Spalding (left), a lawyer on a year-long Fulbright Research Grant in Mumbai, India, he floored us with the idea that the Foreign Corrupt Practices Act causes corruption and hurts poor people. We just heard from him again, this time about the way the Justice Department explains the purpose of the FCPA and approaches enforcement. We'll let Andy speak for himself (because he does it so well). Here's what he said:

Dear FCPA Blog,

I was recently reading the DOJ's "Lay-Person's Guide to the FCPA," available here, which provides a helpful overview of the FCPA, including a brief reference to its legislative history. I am generally grateful for any effort on Justice's part to make the statute transparent and user-friendly; the more that can be done in that area, the better. But I must take issue with Justice's brief but telling account of the statute's legislative history, particularly the political events of the 1970s that precipitated the bill's enactment. The guide is telling, not for what it says, but for what it does not say -- that is, for what the DOJ has seemingly forgotten. And as Edmund Burke famously warned, "those who don't know history are destined to repeat it."

The guide refers to the SEC report, well known to your readers, which disclosed that hundreds of companies had engaged in overseas bribery. The guide further implies that recognition of the need for anti-bribery legislation occurred mainly in response to this report. But the report was not released until mid-1976, and Congress had begun deliberating on the need for anti-bribery legislation as early as August of 1975. What, then, was Congress talking about in 1975, if not the SEC report?

Look to the transcripts of the earliest testimony. Congress was concerned with the conduct of one company in particular -- Lockheed -- which was publicly known at the time to have bribed officials from several overseas governments, particularly Japan, the Netherlands, and Italy. Scandals erupted in these countries, and public officials were shamed or forced to resign as a result. That much remains in our memory, but we forget the rest of the story. Particular attention was paid in congressional testimony to Italy, whose parliament at the time was divided roughly in half between the democrats and, yes, the communists.

Witnesses and congressmen alike, from both sides of the political aisle, expressed concern that revelations of bribery would confirm the stereotype of the corrupt capitalist that was widely promoted in communist propaganda. This, in turn, would weaken our political ties to unstable countries, and open the door to further influence from countries that we believed were hostile to the values of a liberal democratic society. The FCPA, then, was designed not only to promote business ethics, but to serve as an instrument of foreign policy. Ample support for this account in the legislative history may be found at your post here.

Although the Cold War is over, the FCPA nonetheless operates today in an international political context that is only slightly less delicate than in the 1970s. As Congressman Stephen Solarz (D-NY) stated in 1976, "it is important to examine the problem of overseas payments in broader terms than simply a matter of economics or even morality." I would ask, does the DOJ heed the congressman's warning today? Does it consider the impact of FCPA enforcement on delicate international political relationships? I see absolutely no evidence that it does. Indeed, I would politely throw down the gauntlet and challenge anyone to provide an account of Justice's foreign policy vision of FCPA enforcement that requires more than just a couple sentences to articulate.

Foreign Corrupt Practices Act researcher Cody Worthington responded to our post Their Days Are Numbered. To our list of thirteen people waiting to be sentenced for violating or conspiring to violate the FCPA, he suggested we add three more. Here they are:

Joshua Cantor, the president of American Bank Note Holographics. He pleaded guilty in 2001 to a four-count indictment charging him with conspiracy to defraud the U.S., a books-and-records violation, making false statements to auditors, and conspiracy to violate the FCPA. The charges arose from bribes paid on behalf of American Bank Note in Saudi Arabia. Cantor wasn't sentenced as scheduled in 2003. According to his court docket (available here), no new sentencing date has been fixed. Another oddity: despite pleading guilty to four felonies and being out on bail, Cantor travels a lot. Since 2003, he's obtained court approval for trips to Puerto Rico and Israel (twice each), Brazil, Canada, the British Virgin Islands, Spain, the Dominican Republic and Barbados.

Clayton Lewis was a partner in Omega Advisors, Inc., a hedge fund that invested about $126 million in Viktor Kozeny’s Azeri privatization scheme. In an enforcement action against Lewis in 2004, the government said he knew Kozeny planned to bribe Azeri officials but went ahead with Omega's investment anyway. Lewis pleaded guilty in 2005 to violating and conspiring to violate the FCPA. He appeared as a cooperating witness for the government in Frederic Bourke's trial. His sentencing was deferred for the trial and hasn't been rescheduled.

Thomas Farrell worked for Viktor Kozeny in Russia. The American pleaded guilty in 2003 to violating and conspiring to violate the FCPA. Like Lewis, he testified against Bourke. His sentencing was also deferred for Bourke's trial and hasn't been rescheduled..

In Dakar, the capital of the West African country of Senegal, the IMF's regional representative was given a farewell dinner two months ago. After three years in the post, Alex Segura was heading back to his native Spain. As the evening ended, President Abdoulaye Wade handed Segura a going-away gift. It was cash -- €100,000 and $50,000. Segura boarded his flight and left the country, cash in hand. In later explaining Segura's actions, the IMF said he was worried about missing his plane and concerned about finding a place to stash the cash safely in Senegal. Here's a report from AFP.

President Wade, who's 83 and plans to run for re-election in 2012, said there was no corruption, just a mix-up. He issued a statement giving this account of what happened:

The aide-de-camp asked the president of the republic if he should give him (Segura) something, in keeping with custom. The president of the republic replied 'yes' without saying what the sum should be, because there was a custom. The aide-de-camp made a mistake over the amount and realized his mistake later.

The IMF said Segura reported the gift the same night he received it. Arrangements were made to hand it over to Senegal's ambassador in Spain, which was done in early October. Segura is now posted to Washington, D.C. and hasn't spoken about the matter.

Even if the gift-giving incident was a mistake, as President Wade said, Senegal's thirteen million people have other reasons to be upset. An AP report said the president "has dismayed former supporters through ostentatious displays of wealth, including renting numerous suites in a luxury hotel in Switzerland this summer for his annual summer vacation. His Swiss holiday, which one newspaper claimed had cost the government at least $1.6 million, came at the same time that Senegal suffered devastating rains that flooded entire neighborhoods, causing some 264,000 people to lose their homes."

The U.S. Agency for International Development said in its August 2007 assessment (here) that Senegal lacks transparency in public affairs and financial transactions and suffers from chronic corruption. "These phenomena can be seen both in everyday dealings with governmental officials (petty corruption) and in major national government contracts (grand corruption). Together, they increase chronic poverty and the gap between citizens and their state."

Senegal ranks 85th on the Corruption Perception Index (here), tied with Albania, India, Madagascar, Montenegro, Panama and Serbia. Life expectancy is just 59 years, among the lowest in the world. Literacy is under 40%. Unemployment is nearly 50% and more than half the people live below the poverty line. See the CIA World Factbook here.

Opposition legislator Imam Mbaye Niang said he'll ask parliament to investigate the cash gift to the IMF's departing in-country representative. "Wade has to be taken to court for spending national money illegally," he said. "Unfortunately I am sure that we will not succeed because the opposition is the minority in parliament.".

We count at least thirteen people waiting to be sentenced for violating or conspiring to violate the Foreign Corrupt Practices Act. Both offenses carry a prison term of up to five years. And for substantive offenses the fine can be up to $250,000 or twice the gross gain produced by the bribes. Those on our list either pleaded guilty or were convicted at trial. Their names (linked to posts describing their guilty pleas or convictions) are followed by current sentencing dates. The dates often slip, so we'll try to stay on top of any changes.

Who are they? A former congressman, a famous entrepreneur, husband-and-wife movie producers, c-level executives and top managers. Real people who are probably going to jail. Yes, the FCPA is serious, and the consequences of not complying with it can be tragic.